Posted tagged ‘FDIC’

This is a totally misleading report. The loss referred to is only due to illegal activity by one of the major banks (FDIC Chairmen Martin Gruenberg didn’t say if it was B of A or JP Morgan) and their 4 Billion Dollar attorney bill. This is a double whammy as not only did they screw borrowers out of a boatload of cash when they were caught they hired a bunch of high priced lawyers and then wrote the legal bill off of their taxes. They pay fewer taxes and, therefore, you pay more. For a more detailed look at this subject – please read the article below.

Five federal agencies issued a statement Tuesday assuring creditors that they do not run the risk of being found in violation of fair lending laws should they choose to only originate “qualified mortgages” (QM) as defined earlier in the year.

The Consumer Financial Protection Bureau (CFPB), one of the five issuers of Tuesday’s release, handed down in January a number of guidelines for lenders to follow in order for their loans to be classified as QM (and thus “safe” should legal action arise). A major provision of those guidelines is the Ability-to-Repay (ATR) rule, which requires creditors “to make a reasonable, good faith determination that a consumer has the ability to repay a mortgage loan before extending the consumer credit.”

In response to CFPB’s rulemaking, some bankers have indicated they might limit their offerings to only QM products as the transition is made—and many are concerned as a result that their operations may run counter to the guidelines outlined in the Equal Credit and Opportunity Act (ECOA), implemented by the Federal Reserve’s Regulation B.

However, those fears are unfounded, regulators say.

“In the agencies’ view, the requirements of the Ability-to-Repay rule and ECOA are compatible. ECOA and Regulation B promote creditors acting on the basis of their legitimate business needs,” the interagency release reads. “Viewed in this context, and for the reasons described below, the agencies do not anticipate that a creditor’s decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair lending risk.”

FDIC-insured banks earned a record $42.2 billion in profits in the second quarter of this year, up 22.6 percent, or $7.8 billion, from $34.4 billion a year ago. The increase marks the 16th month-in-a-row earnings rose year-over-year.

The FDIC, HUD, Federal Housing Finance Agency (FHFA), Office of the Comptroller of the Currency, Federal Reserve, and Securities and Exchange Commission (SEC) jointly released on Wednesday their proposed revision, which was created in consideration of the industry’s response to the original proposal issued in 2011.

That proposal required lenders to keep a stake in the loans they sold in which borrowers were spending more than 36 percent of their income on payments and in loans with down payments of less than 20 percent. At the time, critics argued it would create an even more restrictive lending environment.

Under the new proposal, the 36 percent income threshold has been raised to 43 percent, relaxing the exemption standards somewhat. The revised rule also eliminates the down payment requirement, opening up lending for low-income borrowers.

The agencies also made adjustments to bring the QRM proposal more in line with the “qualified mortgage” (QM) rule handed down by the Consumer Financial Protection Bureau (CFPB) earlier in the year. The alignment opens up the scope of QRM eligibility, which was originally “limited to closed-end, first-lien mortgages used to purchase or refinance a one-to-four family property, at least one unit of which is the principal dwelling of the borrower.”

“[T]he agencies seek to ensure that relevant definitions in the proposed rule and in the CFPB’s rules on and related to QM are harmonized to reduce compliance burden and complexity, and the potential for conflicting definitions and interpretations where the proposed rule and the QM standard intersect,” the 500-page document reads.

Together, commercial banks and savings institutions insured by the FDIC earned record profits in the first quarter, while the number of “problem” banks continued to decline.

According to the FDIC, net income for FDIC-insured institutions reached an all-time high of $40.3 billion in Q1, up by 15.8 percent from last year. The increase marks the 15th straight quarter earnings improved year-over-year.

The agency also reported half of the 7.019 insured institutions pulled in higher profits compared to the year before, while 90 percent of institutions recorded positive net income for the quarter.

FDIC’s list of “problem” banks was reduced for the eighth straight quarter, decreasing to 612. Two years ago, 888 banks were on the list.

At the same time, the FDIC saw just four of its institutions collapse in the first quarter, which is the smallest number since the second quarter of 2008 when two institutions failed.

So far his year, regulators closed 13 FDIC-insured institutions, down significantly from 24 during the same period in 2012.

“Today’s report shows further progress in the recovery that has been underway in the banking industry for more than three years. We saw improvement in asset quality indicators over the quarter, a continued increase in the number of profitable institutions, and further declines in the number of problem banks and bank failures,” said FDIC Chairman Martin J. Gruenberg. “However, tighter net interest margins and slow loan growth create an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention.”

Commercial banks and savings institution insured byFDIC reported aggregate net income of $37.6 billion in Q3, up 6.6 percent from a reported $35.2 billion in Q3 2011. Aggregate net income has increased on a year-over-year basis for 13 straight quarters.

In addition, 57.5 percent of all insured institutions reported annual improvements in their quarterly net income. The share of institutions reporting net losses in Q3 fell to 10.5 percent from 14.6 percent a year prior. The average return on assets—“a basic yardstick of profitability”—rose from 1.03 percent in Q3 2011 to 1.06 percent in Q3 2012.

The number of banks on FDIC’s “Problem List” declined for the sixth straight quarter, dropping from 732 to 694. The third quarter also marked the first time in three years that there have been fewer than 700 banks on the list.

Total assets of problem institutions declined from $282 billion to $262 billion, the agency reported.

As the number of problem institutions has fallen, so too has the number of bank failures. The third quarter saw 12 failures, the smallest number of quarterly failures since Q4 2008. As of December 4, 50 banks have collapsed in 2012, a substantial decline from 90 during the same period in 2011.

Out of the last nine quarters, eight have seen declines in the number of bank failures.

Also promising was an apparent improvement in asset quality. Insured banks and thrifts charged off $22.3 billion in uncollectible loans during the quarter, down $4.4 billion (16.5 percent) from last year. The amount of seriously delinquent loans and leases (90 days or more past due or in nonaccrual status) fell for the 10th consecutive quarter, and the percentage of loans and leases that were delinquent declined to its lowest level in more than three years.

After some community banks expressed concerns that FDIC examinations “were being conducted without clear standards or consistent application of agency policies and procedures, which could discourage business growth and responsible lending,” the FDIC conducted a report to review its examination process.

The FDIC reviewed examinations conducted over the past five years, ending December 31, 2011.

Major findings of the recently-released report include that timelines for report completion often lengthens as institution ratings worsen, and while community banks can challenge the FDIC’s findings, these challenges are rare and even more rarely sustained.

After completing its onsite work at a community bank or credit union, the FDIC generally takes between two and four weeks to submit an examination report for institutions rated one or two.

For institutions rated three, four, or five, the FDIC often takes anywhere from six to nine weeks.

This variance is attributed to “the additional complexity and volume of deficiencies associated with troubled institutions,” the intricacies required to validate a lower rating, and time spent with bank managers and other officials to come to a consensus before issuing a final report, according to the FDIC’s report.

Compliance reviews generally take about one month to complete after conducting onsite work, according to the report.

While the FDIC says it encourages questions throughout the examination process, institutions may request a formal review if they do not agree with the ultimate outcome of their examination report.

Over the five years reviewed, the FDIC received 41 requests for review. However, only one was sustained, and three were “partially sustained.”

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